e-Business is not primarily about technology (even if the part technology plays in ICT is anything but trivial), but about optimally managing internal processes, and relationships with suppliers, customers and business partners in a complex and often global competitive environment.
It is part of a company’s business strategy; the way a company uses e-business is essentially part of its business model. For instance, the decision whether or not to offer products online is part of the distribution strategy, and the use of e-procurement systems must be embedded in the overall procurement strategy of a company.
Traditionally, many SMEs adopt the basic ICT model, but EU commissioned research indicates that this approach has little impact on the operations SMEs. ICT is categorized as basic, advanced and transforming they have varying impacts on SME operations.
Basic ICT use – little organizational impact
ICT use has become commonplace in modern business. Nearly all companies use e-mail. Many have a website, and some of them offer basic e-commerce services on their website. These basic ICT applications do not have a significant impact on how the company operates, i.e. on its processes or business model.
Many SMEs in manufacturing sectors, notably in the more traditional industries, use ICT on the basic level. There are low investments in technology at this basic level and consequently gains in process efficiency and cost savings are limited. For the average SME, this use of ICT may be optimal, provided that they are not forced by large buyers to upgrade their e-business capabilities.
Advanced e-business activity – significant impact on business processes
“Advanced” e-business means that companies can exchange data electronically with suppliers or customers based on e-business standards. This is the precondition that allows ICT systems to automatically process data (without having to manually key them into the system).
Taking the step from basic to advanced e-business must, however, be well planned and is not without challenges. For most companies, this innovation has significant organizational and financial implications.
Implementing an advanced e-business system may need new, advanced, ICT systems such as ERP (Enterprise Resource Planning) and SCM (Supply Chain Management)systems; implementation of organizational standards and new ways of organizing business data whilst making sure that the new systems are aligned with their actual business processes.
E-Business transformation – new business models and value chains
ICT has affected some business sectors more than others, in particular the ICT services industry, tourism, financial services, publishing and the logistics industry. In these industries, the role of ICT and e-business goes far beyond improving process efficiency.
ICT, and in particular the internet, have had a profound impact on value chains, including the emergence of new players. Many companies have to adapt their business model in order to stay in business.
In tourism, for example, the internet makes it possible for service providers to interact directly with tourism customers, which puts enormous pressure on traditional market intermediaries (travel agencies and tour operators).
At the same time, the internet facilitates market entry, as players can operate exclusively online. In publishing, the advertising and sales revenues of newspaper publishers are decreasing as many young people of the “internet-generation” do not subscribe to a printed newspaper. Convergence of services, multi-channel publishing and the offer of mobile services are some of the catchwords that attempt to give a concrete character to future developments in this sector.
E-business presents opportunities and challenges for all business models. Reducing the threats to your business whilst increasing the opportunities will depend on a myriad of factors within the business and externally, either from competition or the market.
Lack of ICT and e-business skills
Smaller firms sometimes lack a coherent ICT investment strategy or the related skills – partly because of the relatively high cost of employing ICT practitioners. ICT strategy and implementation critically depends on the respective skills of the management. The speed of developments in this field adds to the challenge.
Complying with different ICT requirements.
Although large companies tend to be supportive of SMEs, they can use their power to impose ICT standards and systems upon small supply companies. In B2B exchanges, small firms may therefore be forced to comply with different systems in parallel.
Rising customer expectations
In the internet era, customers increasingly expect to be offered a wide range of information and services online. It can be a challenge for smaller companies to meet these service levels.
Access to international markets.
E-Commerce is an opportunity for many smaller companies to do expand their market area. In order to exploit what can be a very rewarding opportunity; SMEs need to invest in planning, ICT systems, training and implementation of standards.
ICT usage facilitates cooperation.
SMEs need to cooperate, for example by building networks. ICT usage facilitates cooperation in many ways (e.g. through project management tools, or online collaboration tools for design).
Affordable ICT solutions.
ICT vendors and user communities have developed more and better solutions which are targeted to the needs of SMEs in recent years, for example smaller-sized ERP and CRM software packages and free to use or GNU license enterprise software packages. Costs are no longer the main barrier.
Support from large firms.
The economic impact of any communication technology depends critically on the number of users connected. Large companies therefore have a strong incentive to connect with their smaller trading partners in order to reap the full benefits of e-business.